~ Wallace's Attempt at Humanities

Category Archives: ECONOMIC CHALLENGES

There is more to Donald Trump than the man, abrasive personality, rich guy, and Republican candidate. His name will morph into an historical description – even an era. It was simply predictable…bound to happen.

National politics contains both math and romance. He may win most political primaries, eventually secure the Republication nomination…win the presidency – or lose it decisively. All this simply does not matter…it’s the romance that’s undeniable. And, oh yes, Trumpism has now entered the history books. Its spirit has permanence.

Trumpism is securely locked into a new populist movement which was born in the mid-1970. Those who know anything about American History can smell a renewed Populist Movement/The Agrarian Revolt (1880’s-90): the gold/silver battles; the revolt of less educated agrarians – emotionally, economically desperate for monetary system changes; less sophisticated in religion. All of this is accompanied by the sheer greed of a Gilded Age ruling class, which carelessly allowed it.

My 11th grade AP history classes learned what the 16 to 1 ratio meant, how it brought black and white Americans commonality, how it was nuanced – finally featured in L. Frank Baum’s master piece: TheWizard of Oz. Want to know the origin of OZ? Buy me lunch sometime.

No doubt, solid contemporary historians began to detect these trends; yet, their ideological anxiety on presidential elections every four years – would snag them up. While warning signs (now Trumpism) became obvious – the pertinent reality went almost unacknowledged. Trumpism is the dark, deep anger many Americans feel over their obvious dismissal and exclusion. It really has little to do with “Republican obstruction.”

Recently, wonderful Peggy Noonan, WSJ columnist, labeled it: the Protected vs. the Unprotected. She dangled the term “elites” with her “Protected” group….by the way, most of you reading this Wallace column are the “Protected”. Noonan glides on about the Protected relishing a buffer zone…from the Unprotected. Inaccessibility and blamelessness completes their desired scenario. Then there is the “Unprotected” conviction that there is no representation for them – in their once representative government.

If you’re burdened with curiosity, internal fortitude, plus willingness to examine what’s plaguing the U.S.A, there are two books which measurably teach: Samuel Huntington’s Who Are We (2004), which shows our national identity dissolving (Anglo-Protestant heritage, and the loss of our American creed: egalitarianism, liberty, and individualism)… plus Charles Murray’s Coming Apart, (2012), which describes the advent of a new, careless, political upper class – in my mind reminiscent of F. Scot Fitzgerald novels. Grief counseling for readers may be recommended. Our nation’s growing lack of healthy class-sensitivity, conscience is yielding an irreparable societal damage – almost unmendable.

With concentrated condescension reigning in a new socio/ political grouping, ordinary Americans (“rednecks” and citizens of “fly-over” country) receive feckless attitudes chocked with carelessness. Economically, socially; these millions of Americans (aka working Reagan Democrats) are a choking labor population – with pitiful job opportunities…in what society use to consider the “backbone” of America. Their history is atrocious:

Participation in the labor force dropped from 96% in 1968 to 79% in 2015. Over the same period, the portion of these men who were married dropped from 86% to 52%…totally dangerous for US society.

The real family income of people at the bottom half of income distribution hasn’t increased since the late 1960’s.

In the same half century, the U.S. government allowed the immigration of legal, and illegal, of tens of millions of competitors for the remaining working class jobs.

Half the children are now born to unmarried women.

Charles Murray writes that neighborhoods, once with civic cultures, are no longer friendly, or pleasant, much less safe.

Currently 93,688,000 Americans NOT in labor force.

Most apparent, the inventive tech world will yield horrors beyond our imaginations to those millions who remain broken.

Additionally, there is a sea change with large-scale ideological defection from the principles of liberty and individualism. Who would have ever thought that Political Correctness would ruin freedom of thought, speech…on college campuses? It reminds one of Mussolini; additionally, affirmative action demanded that people be treated as groups – leading to equality of outcome, replacing equality before the law. Civil Rights and feminist’s movements, notable for their justifiable grievances, energized this Group ideology further.

As the new upper class was separating from the mainstream – a very different lower class emerged from within the working classes – this has created the solid Trumpism, which will be formidable…and enduring.

Can America’s “Protected”; its “New Upper Classes”; its new crop of “Politicians”, face this consequential plight of millions? Will they begin to restore a “valid opportunity” for fellow Americans?

If it does not get right with its unprotected and dismissed, we lose forever what we were suppose to be. Trumpism will not disappear – only strengthen.

When troubling challenges arise – as in Hampden-Sydney’s election night racial donnybrook, or Harvard University’s very recent academic sanctions against 60 students – forced to withdraw over a cheating scandal, one is reminded of the late John Wayne’s observation: “Courage is being scared to death….and saddling up anyway.”

“Saddling up” are what authorities of educational institutions, private and small, state and sizeable, will be facing including those of our exquisite liberal arts college in Hampden -Sydney, VA 23943. These aren’t small potatoes.

Nathan Harden’s piece, The End of the University as We Know It, is a show-stopping, cold-sobering analysis – aimed at current higher education with the power of a massive meteor in fiery flight. HIs narrative is grim business: “In fifty years…half of the roughly 4,500 colleges and universities now operating in the United States will have ceased to exist with technology driving revolutionary changes which are unstoppable.”

Harden, a 2009 Yale graduate, editor of The College Fix, a higher education web site, is convinced college level education will become free for everyone; our beautiful residential campus at Hampden-Sydney (all colleges) will become obsolete, professors by the tens of thousands will lose their jobs; bachelor’s degree will stand in irrelevancy; in only ten years, Harvard University will enroll 10 million students.

This uncontrollable “college bubble” is balloon size, chasing us with huge levels of student debt – an average of $23,000 per graduate by “some counts.” We all know about tuition costs – its rates far outdistancing inflation for decades. The conclusion: credential inflation is devaluing the sought-after college degree, dictating higher graduate degree requirements….spending of even more tuition debt.

Harden takes no prisoners: “when the bubble bursts, it will end a system of college education that, for all of its history, has been stepped in a culture of exclusivity. We’ll witness the birth of something entirely new as we accept one central and unavoidable fact: The college classroom is about to go virtual.”

He believes that our surrender to the upheaval and anxiety from these technological shifts is a given. Major changes on the horizon include:

The live in-person lecture will disappear replaced by the streaming of videos.

Then there is (MOOCs), “massive open online courses”; this new breed of online courses will alter forever the way universities teach and clients learn. Harden points out that the real value of MOOCs “is their scalability”. For instance, these online courses from a Stanford computer science professor by 2011 enrolled 100,000 students.

Administration of exams and exchange of course work over the internet will become a norm.

The give and take (discourse) of academic exchange will be solidly found on the interactive online spaces with our hyper-connected youth, latest tablet versions in hand, continuing to spend their time where they’ve comfortably learned to reside.

Those surviving colleges/universities now geographically boundless, unlimited by state lines, or time zones, offering course variety at a fraction of today’s cost, will be the survivors.

“Big budgeted universities carrying large transactional costs stand to lose the most. Smaller, more nimble institutions with sound leadership will do best”.

This shake down of our current university/college system could be merciless, yet the student will gain a near-universal access to a high quality of teaching, scholarship – at minimum cost. It frightens to think the Hampden-Sydney College experience of Georgian buildings, beautiful campuses, and wonderful libraries, with sometime eccentric but brilliant professors, generating life-long friendships, will evaporate – faster than we think.

Here’s what’s really frightens. Nathan Harden reminds it’s easy to forget only 10 years ago Facebook was unknown. Teens now approaching college years are member of the first generation to have matured conducting a major part of their social lives…online. These students are prepared to engage both professors and fellow students online – in ways not known to their immediate predecessors.

Interestingly, elite schools will now educate the masses “as well as the select few.” What about the social experience? Learning from peer exchanges in informal dorm bull sessions can result in successful social networking. Hampden-Sydney College enjoys some success in leading its graduates to solid jobs – particularly landing potential careers in strong markets for its accomplished graduates.

Harden assures that the gap between the online experience and the in-person experience (residential) continues to close. He sees a targeted, customized curriculum planned by students, which will lead them to construct identifiable resumes aimed for potential employers. This fantasy-like dynamic is never ending….it may not be fantasy at all.

The university system has looked the same for nearly a thousand years….classrooms, professors, students at desks, engaging the professors. Lecture and library have been the nucleus of it all. Sadly, my public school teaching experience allows me to understand Nathan Harden when he writes; “Deep engagement with texts and passionate learning aren’t the prevailing characteristics of most college classrooms today. More common are grade inflation, poor student discipline, and apathetic teachers’ rubberstamping students just to keep them paying tuition for one more term.”

This isn’t true in Hampden-Sydney VA….not now, not yet. Saddling up to face these challenges is all consuming. Will all these developments really go down? Thomas N. Allen, ‘60, H-SC’s Board Chairman, and I discussed all this over lunch recently – we deeply worried together.

Ocean waves break naturally on the beach at 78th Street. Temperatures are moderate – so far…one can walk in sand without the fear of burn.

A grotesque, sad drowning of a 14 year old boy happened in front of us last Saturday; it remains seared in tragic memory. Restaurants are moderately busy; waiting lines, if existent, are short – and convenient. Vacationer numbers seem down. “A slow season”, murmured a restaurateur to me, in passing…and so it is.

“Scary Economics, 2013”, published in The Farmville Herald, and Jefferson Policy Review, brought reactions hardly benign. Enjoined by a commonality of disgust, depression, and hunkering down for economic survival, readers grappled: “In 2008, I was doing the best I’ve ever done – now I am barely hanging on. We now have one half the employees, and our contribution for health benefits has increase $140.00 a month.”

John Moss wrote, “All the happy talk is not supported by the fundamentals. The middle class has little discretionary income; job growth and job quality are both flat. The chattering heads are trying to talk us into recovery – cheer leading is not the solution.” But, in addressing the true challenge, a slow walking bedevils, yet it may keep a story-line down.

A beleaguered middle class’ thirst for economic hope remains unquenched. For many, it diminishes one’s faith in government, negating even rudimentary confidence in Washington to face stark economic realities. Most economists agree the U.S. economy cannot successfully elevate without a growth of 3 to 3.5 per cent minimum. Currently we’re hanging around 1.8 – 2 %. Now, the Second Quarter, 2013, just reported a 1.7 growth. “Taint funny, McGhee”, said Molly, admonishing Fibber in the old radio days.

Take the housing market. Retails sales and housing starts marked low points in releases of recent weeks. Failing to meet projections for June by growing only 0.4% – less than May’s (downwardly revised) rate of 0.5%, the forecast of 0.8% may be a stretch. Weaknesses appear in building material and garden supply sales (-2.2%).

Housing starts hit its lowest point in a year. Median estimates called for at least 160,000 more units than were booked, with building permits dropping 7.5%. Worse, construction for single-

family homes declined 0.8%. Hope is consumer sentiment might change – from 83.9% this past June, to 84 in July. Tell that to a damaged middle class, who has the daily bitter draught to drink.

Then there’s growth of a “debt-denial” industry.

From middle class agony – to national debt realities, the circumstances seem jaw-dropping. At first, there was encouragement in the Congressional Budget Office’s (CBO) revised numbers – the national debt looked less menacing than earlier feared. But a closer examination of America’s debt shows a much different – and alarming – reality.

In mid-May, the CBO said the federal deficit in fiscal 2013, which ends in September, would be 642 billion – down from the one trillion-plus of the previous four years. Generously, the President recently assured, “for the next 10 years it’s going to be in a sustainable place.” Not so fast, says Veronique de Rugy, a senior research fellow, at the Mercatus Center at George Mason University.

The money that the federal government owes to domestic and foreign investors – is almost 90 percent higher than at the onset of the financial crisis in 2008. Public debt is now 75 percent of GDP, the highest level since 1950 – and that excludes debt the government owes to Social Security, and other accounts. Good luck with that.

The CBO projects the public debt is scheduled to grow to 19 trillion by 2023, or 73.6 percent of projected GDP – up from 36 percent as recently as the end of 2007…and not an official acknowledgment in sight.

Since World War II, the main drivers of each recovery have been federal spending, technical innovation, residential housing and / or consumer spending. History will not judge the treatment of the middle class, and the “debt-denialists” kindly….nor should they.

Raymond B. Wallace, Jr. is a former CEO, classroom History teacher, and Trustee of the Virginia Retirement System (VRS). He can be reached at rbwallace01@verizon.net.

Considering the June, 2013 Jobs’ Report, the economic alarm bell still rings loudly in my ears. For this observer, there seems no return to the land of economy comfort zone.

Sure there’s presumed relief when the Labor Department reports the economy gained 195,000 jobs in June – better than expected. Additionally, it appears that the U.S. economy gained an additional 70,000 more jobs in April and May than originally reported…all great. Right?

Still. A bracing economy it is not.

The U.S economy remains troubling – in job earnings, in joblessness (the inner-social dynamic), in its psychological affect on thinking Americans. There’s no increase in the ratio of employment to population; no decline in teenage employment rate (24%); sadly, no increase in the real average weekly earnings of the employed….working people in this country are hurting.

Of the 144 million Americans employed last month, only 116 million were working full-time. The July 5th report shows that 58.7% of the civilian adult population (245 million) was working last month. However, only 47% of Americans had a full-time job. You read me right…ONLY 47% of Americans were full time employees! It’s enough to keep one thrashing awake at night.

Additionally, in June, 2013, Americans who desire full-time work were forced into part-time employment; that figure jumped 352,000 – now over 8 million. Paradoxically, the Federal Reserve must begin its tapering back program of long-term asset purchases, or a “quantitative easing” – now overdue. The Fed chairman recently stated the efficiency of “quantitative easing” is low – the costs and risks are substantial. Believe me there is no health in any of this.

Steven P. Peterson, PhD, Managing Director, Investments at the Virginia Retirement System (VRS), supportive friend to this retired VRS Trustee, has an interesting take on our current economic conditions: “Iam reminded of learning to ride a bike; I began with training wheels and eventually my father announced we were going to try it without the training wheels. He was confident – I was terrified. That’s what’s going on in markets today and it is serving up a few paradoxes. Dr Peterson is on to something.

Several weeks ago the first quarter GDP was revised – from 2.4% to 1.8%, surprisingly to the down side. Peterson observes after the market’s reaction to Fed Chairman Bernanke’s earlier comments regarding “tapering down” on long-term assets, he expected the markets to panic with this perceived bad news.

Alas, no. The market rebounds because it presumed it was less likelihood the Fed would take the “training wheels” off – in the near future. After seeing the recovery wasn’t as robust as Bernanke projected, this continued policy seemed justified. In other words, the weaker results appear, the more likely stock market performance improves…or, a worsening economy creates a higher stock market.

So we have a new dynamic, for the chattering class. Books are in the works; financial bloggers obsess – with conflicting posts. Financial experts with contradictory economic thrusts cannot hold out much longer….and the longer the contradiction exists, the more bruising, excruciating the pain will be – to unwind.

Jobless rates remain undeniably atrocious. While historically true that Fed’s open market actions aided in avoiding prolonged recession in early 2009; it brought initiation of the first QE program. That policy eventually yielded a different market behavior. It fed a new, struggling economic scenario.

Distorted financial markets have a history of leading economies to catastrophic brinks…have we not forgotten? The burning question is how long will it be before investors begin to turn back to economic fundamentals – when will they once again react positively to good news, and negatively to the bad? Are we between the Scylla and Charybdis in this U.S. economy?

Bette Davis, academy award actress of the 1930’s, 40’s, 50’s, had a great line in the film, AllAbout Eve: “Fasten your seatbelts. It’s going to be a bumpy night.” Such will be our experience as we get back to a state of rationality where this arduous journey can only begin…and hurt.

Raymond B. Wallace, Jr., a former CEO, former trustee of Virginia Retirement System, and a retired Advance Placement U.S. History teacher in Richmond, can be reached at: rbwallace01@verizon.net.

My days as a Trustee for The Virginia Retirement System (VRS) concluded March 1, 2013 – after eleven years.

Dr. John M. Albertine, Albertine Enterprises, joined me in exit after serving his designated two full terms. Albertine, the consummate business executive, held one of four important Investment Professional seats….as trustee he implacably challenged the conventional wisdom with frequency; he was consistently prescient.

At the time of exit, it was clear a new number of economic realities had been chronicled. For instance, former Federal Reserve Chairman Alan Greenspan publically bemoaned: “Unless we remove some of the deep-seated uncertainly, especially for investments in very long-lived assets” growth will remain under 2 percent.” Ultraseriously, Greenspan supported the $2.5 trillion package of spending cuts and tax increases proposed by Erskine Bowles and Senator Alan Simpson.

Chronicling these economic realities left us in quandary. While Commonwealth employees and public school teachers were working longer, retiring later, and experiencing smaller annual wage increases, it would now slightly help the Virginia Retirement System (VRS) with its long-term bills.

Michael Martz, Times-Dispatch reporter, wrote that the April board meeting adopted a series of slight adjustments, resulting in a minor gain for the retirement system – especially funding pensions for teachers and state police. That action was based on a review of assumptions and experiences between mid-2008 and mid-2012, which even in economic terms, was “no day at the beach.”

Martz further observed the recent years had been anything but comforting: “After adjusting for inflation over the past 10 years, Commonwealth employee wages increased an average 0.12 percent, and teacher pay fell 0.19 percent”. The biggest VRS assumption – how much the $ 52 billion system will earn on its investments – will not change. VRS will continue to assume a long-term annual rate of return of 7 percent on investments.

Within the past year, localities and school boards have little choice but to pay Generally Assembly mandated rates. Coming up on the horizon will be the real test – whether the General Assembly sticks to the funding plan, which it approved in the 2012 pension reform legislation.

This Board knows that in the current biennium, the pension reform legislation calls for school boards to pay only 70 percent of the VRS recommended contribution rates. By the 2014-16 biennium, you will see an increase to 80% – the 2016-18 increases further to 90%. Finally by July 1, 2018 the law requires school boards and other VRS employers pay the 100% rates recommended by the VRS Board of Trustees. Will the General Assembly stick to this funding policy? Time will tell.

Regarding the “borrowed” funds from the VRS Trust Fund, Governor McDonnell, making good his commitment to begin a 10-year payback, funded the first and second installments on the payback by adding an extra 1% to the contribution rates. Other installments will be due in future state budgets, which will not be enacted until after this Governor’s term expires. What will his successor bring? Again, we will see.

In the waning days of this trusteeship, several private exchanges with top level management inspired some taunting introspection. Expressing my uncertainty and confronting this inexhaustible set of economic challenges, a calibrated exchange occurred between us. One reacted: “maybe for the first time ever, the US may seriously be in a situation where our youth, in the aggregate, may not get as high an improvement in the standard of living as the historical long term trajectory would suggest.”

Our dialogue continued; “That doesn’t mean doom and gloom. But the ‘American Century’ may give way to ‘China Rising’….I do not think that long term China will flame out the way Japan did.”

As a retiring trustee, I could not disagree.

Raymond B. Wallace, Jr., a former CEO, former Trustee of Virginia Retirement System, and a retired classroom teacher at Mills Godwin High School, can be reached at rbwallace01@verizon.net.

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